Justice Department asked to investigate Amazon’s "monopolization" of book market

This posting was written by Jeffrey May, J.D.

A group of authors, and the American Booksellers Association—a trade association representing independently-owned bookstores—are asking the Department of Justice to scrutinize the business practices of online retailer Amazon. They are calling on the Department of Justice Antitrust Division to investigate Amazon’s “power over the book market, and the ways in which the company exercises its power.”

In separate letters sent July 13 to William J. Baer, Assistant Attorney General in charge of the Antitrust Division, the groups made their case against Amazon. Among other things, they contended that the online retailer abuses its monopsony power over large and small publishers and harms competing book sellers though predatory, below-cost sales.

The author group, which calls itself Authors United, cites published figures in an effort to demonstrate Amazon's monopoly power. According to the authors, Amazon controls more than 75 percent of online sales of physical books; more than 65 percent of e-book sales; and more than 40 percent of sales of new books.

Also noted by the authors were Amazon's hard-ball business tactics with publisher Hachette Book Group during a long-running contract dispute in 2014 and the retailer’s purported efforts aimed at “content control.” Last year, Authors United sent a letter tothe directors of Amazon, accusing the company of “sanctioning Hachette authors’ books” in order to “enhance its bargaining position” with the publisher. In that letter, the self-identified “literary novelists, Pulitzer Prize-winning journalists, and poets; thriller writers and debut and midlist authors” explained that “[n]o group of authors as diverse or prominent as this has ever come together before in support of a single cause.” During the contract dispute, Amazon allegedly “engaged in content control, selling some books but not others based on the author’s prominence or the book’s political leanings.”

This latest call for a Justice Department investigation comes one month after the European Commission (EC) announced that it had opened a formal antitrust investigation into Amazon's e-book distribution contracts with publishers. The EC is looking into whether Amazon, the largest distributor of e-books in Europe, violated antitrust laws by requiring publishers to give Amazon the right to be informed of more favorable or alternative terms offered to its competitors and/or the right to terms and conditions at least as good as those offered to its competitors. 

Mergers Reported under HSR Act Down Slightly in FY 2012

This posting was written by Tobias J. Gillett, Contributor to Wolters Kluwer Antitrust Law Daily.

The number of mergers reported under the Hart-Scott-Rodino (HSR) Premerger Notification Program between October 1, 2011 and September 30, 2012 decreased approximately 1.4% from the previous fiscal year, according to the Hart-Scott-Rodino Annual Report for fiscal year 2012, issued on April 31 by the FTC and Department of Justice Antitrust Division.

The report states that 1,429 transactions were reported under the HSR Act during FY 2012, down from the 1,450 reported in FY 2011, but still significantly more than the 1,166 reported in FY 2010 and the 716 reported in FY 2009.

During FY 2012, the FTC brought 25 merger enforcement actions, including three in which the Commission initiated administrative litigation; 15 in which it accepted consent orders for public comment; 14 which resulted in final orders (with one still pending); and seven in which the transactions were abandoned or restructured as a result of antitrust concerns raised during the investigation.

The Antitrust Division also challenged 19 merger transactions that it concluded might have substantially lessened competition if allowed to proceed as proposed. These challenges resulted in seven consent decrees, seven abandoned transactions, two restructured transactions, and three transactions in which the parties changed their conduct to resolve Justice Department concerns. In addition, the agencies brought two actions against parties for failing to comply with the HSR notification requirements, resulting in a total of $1.35 million in civil penalties.

Other highlights of the report include a 10.9% decline from FY 2011 in the number of merger investigations in which second requests were issued, from 55 in FY 2011 to 49 in FY 2012. The number of transactions in which early termination was requested decreased from 82% (1,157) of reported transactions to 78% (1,094) of such transactions, while the number of requests granted out of the total requested increased from 77% in fiscal year 2011 to 82% in fiscal year 2012.

The report also discusses recent developments in HSR enforcement, including the FTC’s August 2012 issuance of a Notice of Proposed Rulemaking proposing changes to the premerger notification rules. The changes would revise the rules to provide a framework for determining when a transaction involving the transfer of rights to a patent in the pharmaceutical industry is reportable under the HSR Act. The FTC also published adjustments to its reporting thresholds, as required by the 2000 amendments to Section 7A of the Clayton Act, that increase the threshold from $66 million to $68.2 million.

The report contains descriptions of various FTC and Antitrust Division enforcement actions and includes appendices with tables of statistics summarizing transactions from fiscal years 2003-2012, as well as tables regarding the number of transactions reported and filings received by month during that period and data profiling Hart-Scott-Rodino premerger notification filings and enforcement interests. The report concludes that the HSR Act continues to do "what Congress intended, giving the government the opportunity to investigate and challenge those relatively large mergers that are likely to harm consumers before injury can arise."

The HSR Act requires certain proposed acquisitions of voting securities or assets to be reported to the FTC and the Antitrust Division prior to consummation. It imposes a waiting period, usually of 30 days (15 days in the case of a cash tender offer or a bankruptcy sale), before the parties may complete the transaction. The FTC and DOJ can issue second requests for more information, which will extend the waiting period for 30 days (10 days in the case of a cash tender offer or a bankruptcy sale) after compliance with the request. The FTC and DOJ may challenge the transaction in federal district court or in administrative proceedings.

Antitrust Division Will No Longer “Carve-Out” from Corporate Plea Agreements Employees Not Believed to Be Culpable: Baer

This posting was written by John W. Arden.

On April 12, the Department of Justice Antitrust Division announced a change in the Division’s "carve-out" practice regarding corporate plea agreements, stating an intent to continue to exclude (or "carve out") from plea agreements employees believed to be culpable, but not to carve out employees for reasons unrelated to culpability, such as refusal to cooperate with an investigation.

"Going forward, we are making certain changes to the Antitrust Division’s approach to corporate plea agreements," said Bill Baer, Assistant Attorney General in charge of the Antitrust Division. "In the past, the division’s corporate plea agreements have, in appropriate circumstances, included a provision offering non-prosecution protection to those employees of the corporation who cooperate with the investigation and whose conduct does not warrant prosecution. The division excluded, or carved out, employees who were believed to be culpable. In certain circumstances, it also carved out employees who refused to cooperate with the division’s investigation, employees against whom the division was still developing evidence and employees with potentially relevant information who could not be located."

"As part of a thorough review of the division’s approach to corporate dispositions, we have decided to implement two changes," the antitrust chief continued.

The first change is that the division "will continue to carve out employees who we have a reason to believe were involved in criminal wrongdoing and who are potential targets of our investigation. However, we will no longer carve out employees for reasons unrelated to culpability."

The second change is that the division "will not include the names of carved-out employees in the plea agreement itself." Those names will be listed in an appendix, which the Antitrust Division will ask to be filed under seal. "Absent some significant justification, it is ordinarily not appropriate to publicly identify uncharged third-party wrongdoers," Baer said.

These policy changes were highly anticipated by the antitrust bar and are consistent with the practice of other divisions of the U.S. Department of Justice.

Baer Confirmed by Senate to Serve as Antitrust Chief

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The U.S. Senate on December 30, 2012, confirmed William Baer to serve as Assistant Attorney General in charge of the Department of Justice Antitrust Division. The vote was 64 to 26.

Baer was nominated by the President on February 6. His nomination was reported by the Senate Judiciary Committee on September 20.

“Bill is a highly-skilled and well-respected antitrust lawyer who understands the importance of promoting competition in order for consumers to reap the benefits of lower prices and better quality products and services,” said Attorney General Holder in a December 30 statement welcoming the confirmation. “I have no doubt that he will lead the Antitrust Division effectively in its vigorous enforcement of the antitrust laws.”

Recently, Baer has headed the antitrust group at the Washington, D.C. office of Arnold & Porter, LLP. Baer held a number of high-level positions at the FTC, including a stint as Director of the agency's Bureau of Competition in the 1990s. After earning a J.D. at Stanford Law School, Baer began his legal career in 1975 as a trial attorney for the FTC Bureau of Consumer Protection.

Baer takes the helm from Renata B. Hesse, who was appointed Acting Assistant Attorney General for the Antitrust Division in November 2012.

Hesse Appointed Acting Chief of Antitrust Division

This posting was written by John W. Arden.

In the wake of Joseph Wayland’s resignation last week, Renata B. Hesse has been appointed Acting Assistant General in charge of the Department of Justice Antitrust Division.

She is the third acting antitrust chief appointed since Christine Varney left the position of Assistant Attorney General in charge of the Antitrust Division on August 5, 2011. Sharis A. Pozen served as Acting Assistant Attorney General through April 2012, when Wayland took over. William J. Baer was nominated as antitrust chief in February 2012, but the nomination has been stalled.

Hesse has served as Deputy Assistant Attorney General for Criminal and Civil Operations in the Antitrust Division since August 2012. Previously, she was a Special Advisor to the Assistant Attorney General for Antitrust, chief of the Division’s Network & Technology Enforcement Section, and an attorney in its Merger Task Force and Transportation Energy & Agriculture Section. She received the Attorney General’s Distinguished Service Award in 2005.

She served as Senior Counsel to the Chairman for Transactions at the Federal Communication Commission, where she oversaw the Commission’s investigation of AT&T’s proposed acquisition of T-Mobile. Before joining the Commission, Hesse was a partner in the Washington, D.C. office of Wilson, Sonsini Goodrich & Rosati. She received her Bachelor of Arts degree in Political Science from Wellesley College in 1986 and her Juris Doctor from the University of California, Berkley, in 1990.

Acting Antitrust Chief to Step Down

This posting was written by John W. Arden.

After six months in the position, Joseph Wayland, Acting Assistant Attorney General in charge of the Justice of Department Antitrust Division, will step down next week, according to published reports.

Wayland became the acting antitrust chief in April 2012, following the departure of then-Acting Assistant Attorney General Sharis A. Pozen.

There has not been an Assistant Attorney General in charge of the Antitrust Division since Christine Varney left the position on August 5, 2011, to return to private practice. President Obama nominated William J. Baer as antitrust chief in February 2012, but the nomination has been stalled.

Prior to his current role, Wayland served as Deputy Assistant Attorney General for Civil Enforcement at the Antitrust Division. He joined the division in September 2010 and worked on a number of high-profile cases, including the Justice Department’s successful challenges to AT&T’s proposed acquisition of T-Mobile, USA, Inc. and H&R Block’s proposed acquisition of 2SS Holdings, the maker of TaxACT tax preparation software.

Wayland is reported to be returning to Simpson Thacher & Bartlett LLP, the firm he left to join the Antitrust Division.

No announcement has been made regarding Wayland’s successor.

Wayland to Serve as Acting Antitrust Chief Pending Confirmation of Baer

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

With Senate confirmation of William Baer unlikely to happen any time soon, the Department of Justice has announced that Joseph Wayland will serve as the Acting Assistant Attorney General in charge of the Justice Department Antitrust Division after the departure of Sharis A. Pozen at the end of April.

Wayland is the Deputy Assistant Attorney General for Civil Enforcement at the Antitrust Division. He joined the Antitrust Division in September 2010 and has worked on a number of high-profile cases. He was the lead trial counsel in the Justice Department’s successful challenge to AT&T Inc.’s proposed acquisition of T-Mobile USA, Inc. He also headed up the trial team that stopped H&R Block, Inc.’s proposed acquisition of 2SS Holdings—the maker of “TaxACT” tax preparation software.

Prior to joining the Antitrust Division, Wayland was in private practice, as a partner with Simpson, Thacher. He joined the firm in 1988.

Leibowitz, Pozen Discuss Year’s Highlights at ABA Spring Antitrust Meeting

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

FTC Chairman Jon Leibowitz and Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice Antitrust Division, discussed the active enforcement agendas at their agencies at the American Bar Association Section of Antitrust Law Spring Meeting on March 30 in Washington, D.C.


Acting Assistant Attorney General Pozen said that the Antitrust Division had an “amazing” year. With respect to criminal enforcement, she noted the recent conviction of AU Optronics Corporation of Taiwan, its U.S. subsidiary, and its former president and former executive vice president for conspiring to fix prices of thin-film transistor-liquid crystal display (TFT-LCD) panels.

On the civil enforcement side, Pozen mentioned two recent successes in the merger enforcement area. She called AT&T’s decision to abandon its proposed acquisition of T-Mobile USA Inc. in the face of a Justice Department challenge a “tremendous victory” and an example of federal/state cooperation. Pozen also noted a federal district decision enjoining H&R Block, Inc.’s proposed acquisition of 2SS Holdings, Inc.—the maker of “TaxACT” tax preparation software (2011-2 Trade Cases ¶77,678). She commended the decision, saying it read like a treatise. Other recommended reading, according to Pozen, is the competitive impact statement, explaining the consent decree resolving the government’s monopolization allegations against United Regional Health Care System of Wichita Falls (2011-2 Trade Cases ¶77,619).

The FTC continued to focus on the health care sector over the past year, the FTC chairman pointed out in his remarks. Leibowitz noted three hospital merger cases in litigation. First, he mentioned the Commission opinion requiring ProMedica Health System to divest rival St. Luke's Hospital in Toledo, Ohio. Second, he said that the FTC was waiting for a federal district court to rule on its request for a preliminary injunction to block OSF Healthcare System’s proposed acquisition of Rockford Health System, which would combine two of the three major hospital systems in Rockford, Illinois. Finally, the FTC chairman highlighted the U.S. Solicitor General’s Supreme Court petition questioning a decision of the U.S. Court of Appeals in Atlanta (2011-2 Trade Cases ¶77,722), holding that the proposed combination of the only two hospitals in Albany, Georgia, was immune from an FTC antitrust attack under the state action doctrine.

Looking ahead, Pozen, who is resigning effective April 30, said that she hoped for a smooth transition to her successor. William Baer—the head of the antitrust group at the Washington, D.C. office of Arnold & Porter, LLP, and a former director of the FTC Bureau of Competition—was nominated to serve as the Assistant Attorney General in charge of the Antitrust Division on February 6. The nomination is pending in the Senate Judiciary Committee.

FTC Chairman Leibowitz said that top enforcement priorities going forward would focus on technology and health care issues, as well as “last dollar fraud,” such as deceptive foreclosure rescue and bogus credit repair schemes. In the technology area, Leibowitz said the FTC was involved in a number of open investigations that he could not discuss. The chairman also noted in his remarks that, with the recent Senate confirmation of Maureen Ohlhausen, the Commission would be operating with a full five-member team.

Baer to Be Nominated as Antitrust Chief

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

President Barack Obama intends to nominate Bill Baer to serve as Assistant Attorney General in charge of the Department of Justice Antitrust Division, according to a February 3 White House announcement. Baer would succeed Acting Assistant Attorney General Sharis A. Pozen, who will resign effective April 30 to return to private practice.

Currently the head of the antitrust group at the Washington, D.C. office of Arnold & Porter, LLP, Baer has held a number of high-level positions at the Federal Trade Commission, including director of the FTC’s Bureau of Competition in the 1990s.

During his tenure, the Bureau of Competition was very active in the merger enforcement area. Among the most notable cases was the FTC’s successful challenge to the merger of office supply superstores Staples and Office Depot (1997-2 Trade Cases ¶71,867, 970 F. Supp. 1066 (D.D.C. 1997)).

After earning a J.D. at Stanford Law School, Baer began his legal career in 1975 as a trial attorney for the FTC Bureau of Consumer Protection. He joined Arnold & Porter in 1980, becoming a partner at the firm in 1983. In his practice, Baer represents a broad range of companies in U.S. and international cartel investigations, mergers and acquisition reviews, and in antitrust litigation, it was noted.

Pozen Resigns as Acting Chief of Antitrust Division

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

Less than six months after her appointment as Acting Assistant Attorney General in charge of the Department of Justice Antitrust Division, Sharis A. Pozen has announced her resignation, effective as of April 30, 2012, according to a January 23 announcement.

Pozen came to the Justice Department in February 2009. She served as chief of staff and counsel and as a key deputy to former Assistant Attorney General Christine A. Varney. Upon Varney’s departure from the division, Pozen was named acting antitrust chief on August 4, 2011.

Prior to coming to the Antitrust Division, Pozen was a partner in the Antitrust, Competition and Consumer Protection Group of Hogan & Hartson (now Hogan Lovells). She also worked for five years at the FTC as an attorney advisor, as assistant to the Bureau of Competition Director, and as a staff attorney.

There was no word on who would replace the Acting Assistant Attorney General. However, there is speculation in the media that William J. Baer, head of the antitrust group at the Washington, D.C. office of Arnold & Porter, LLP., might be on the short-list of candidates. Baer has held a number of high-level positions at the Federal Trade Commission, including director of the FTC’s Bureau of Competition.

Under Pozen’s brief leadership, the Antitrust Division challenged the now-abandoned merger of AT&T Inc. and T-Mobile USA Inc. During her tenure as antitrust chief, the Antitrust Division also successfully blocked the proposed acquisition by H&R Block Inc. of TaxACT, a digital do-it-yourself tax-preparation software provider, at the government’s request (2011-2 Trade Cases ¶77,678).

Among the major accomplishments in the criminal area were the Justice Department’s first enforcement actions targeting price fixing and bid rigging in the automotive parts industry. As part of the investigation, Furukawa Electric Co. Ltd., a supplier of automotive wire harnesses and related products, has pleaded guilty and been fined $200 million fine for its involvement in the conspiracy. That investigation, among many others, is ongoing.

Pozen Named Acting Head of Antitrust Division

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

With Assistant Attorney General Christine Varney scheduled to step down as head of the Department of Justice Antitrust Division today, the Department of Justice has named Deputy Assistant Attorney General Sharis Arnold Pozen as Acting Assistant Attorney General.

“Sharis is a highly experienced antitrust enforcer and I am confident that she will continue to lead the Antitrust Division in its mission to vigorously enforce the antitrust laws,” said Attorney General Eric Holder.

Pozen has played a lead role in a number of civil merger and non-meger enforcement matters since joining the Antitrust Division. Pozen was also involved in the federal antitrust agencies’ update of the Horizontal Merger Guidelines and the Antitrust Division’s revision of its Merger Remedy Guidelines.

Prior to coming to the Antitrust Division, Pozen was a partner in the Antitrust, Competition and Consumer Protection Group of Hogan & Hartson (now Hogan Lovells). She also worked for five years at the Federal Trade Commission as an attorney advisor, as assistant to the Bureau of Competition Director, and as a staff attorney.

The appointment was announced in an August 4 news release.

Varney announced her departure from the Antitrust Division, effective as of August 5, on July 6. For further details regarding Varney’s move, see the July 7 posting on Trade Regulation Talk (“Antitrust Chief to Leave Justice Department for Private Practince”).

Antitrust Chief to Leave Justice Department for Private Practice

This posting was written by John W. Arden.

Christine Varney, Assistant Attorney General in charge of the Department of Justice Antitrust Division, is stepping down from her government post on August 5 to return to private practice.

Varney joined the Justice Department in April 2009, after being confirmed by the Senate. She previously served as Federal Trade Commissioner from 1994 to 1997. She is reportedly joining the law firm of Cravath, Swain & Moore LLP.

“Christine Varney led the Antitrust Division with great distinction through a period when the department confronted a number of proposed mergers and other matters that could have led to higher prices, lower quality products and less innovation in a recovering economy,” said Attorney General Eric Holder. “There is no doubt that her tireless work helped protect consumers and businesses from anticompetitive conduct and preserved competition in America’s economy. I will miss her leadership.”

The Assistant Attorney General came to the job after the Obama administration pledged to reinvigorate antitrust enforcement. During confirmation hearings, she set out three main areas of focus: (1) the rebalance of legal and economic theories in antitrust analysis and enforcement; (2) a renewed collaboration between the Antitrust Division and the Federal Trade Commission; and (3) continued cooperation with worldwide antitrust authorities.

When asked whether strong antitrust enforcement was appropriate during an economic crisis, Varney responded that “clear and consistent antitrust enforcement—protecting competition and thus consumers while being conscious of the need for economic stability—is essential to a growing and healthy free market economy.”

Sherman Act, Section 2 Enforcement

Soon after her confirmation, Varney made news by withdrawing the Antitrust Division’s September 2008 report (“Competition and Monopoly: Single-Firm Conduct Under Section 2 of the Sherman Act,” CCH Trade Regulation Reporter ¶50,231), which examined how specific types of single-firm conduct violate Section 2 of the Sherman Act. When issued, the report was severely criticized by three FTC Commissioners, who called it “a blueprint for radically weakened enforcement” of monopoly law.

Varney said that withdrawing the report was “a shift in philosophy and the clearest way to let everyone know that the Antitrust Division will be aggressively pursuing cases where monopolists try to use their dominance in the marketplace to stifle competition and harm consumers.”

Merger Guidelines

Her desire to work in collaboration with the FTC may be seen in the agencies’ update to the Horizontal Merger Guidelines (CCH Trade Regulation Reporter ¶13,100), issued in August 2010. The joint guidelines, which hadn’t been thoroughly overhauled since 1992, were intended to outline for merging parties, courts, and antitrust practitioners how the federal antitrust agencies evaluate the likely competitive impact of mergers and whether those mergers comply with U.S. antitrust law.

According to both the FTC and the Antitrust Division, the revised guidelines better reflected the agencies’ actual practices, providing more clarity and transparency to the process.

Just last month, the Antitrust Division issued an update to its 2004 guidance on merger remedies. The Policy Guide to Merger Remedies (CCH Trade Regulation Reporter ¶13,172) is used by Antitrust Division staff in analyzing proposed remedies in merger matters and is intended to provide transparency into the Division’s approach for the business community, antitrust bar, and the broader public.

Merger Enforcement

In a June 24 speech examining “whether the Antitrust Division has been steadfast in ensuring vigorous enforcement of the antitrust law, as I promised upon confirmation," Varney highlighted the Division’s merger enforcement efforts. The Antitrust Division was committed to going to court “where the parties have been unwilling to resolve the anticompetitive aspects of their transactions,” she said.

She cited two current merger challenges: H&R Block Inc.’s proposed acquisition of the maker of TaxACT do-it-yourself tax preparation software and the combination of point-of-sale (POS) terminal sellers VeriFone Systems Incorporated and Hypercom Corporation. She also noted the recent settlement of a third matter involving the acquisition of a Tyson Foods Harrisonburg chicken processing complex by George’s, Inc.

Varney also discussed mergers that involved vertical theories, including Ticketmaster Entertainment’s acquisition of concert promoter Live Nation, Inc.; a joint venture between Comcast Corp. and General Electric Co.’s subsidiary NBC Universal Inc.; and Google’s acquisition of ITA Software Inc.

The Antitrust Division reviewed these vertical transactions "in light of their specific facts and market conditions and evaluated the competitive harms," said Varney. "In each case, we concluded that the transactions, as proposed, would give rise to competitive harm, and while we were prepared to sue, the parties agreed to consent decrees that addressed our concerns."

Partnerships with Other Agencies, Governments

Varney also focused on her efforts to strengthen partnerships with other federal agencies, state agencies, and other governments, particularly those foreign countries with emerging economies. The Division worked collaboratively and provided input on competition issues with the Department of Transportation, the Federal Energy Regulatory Commission, the Securities and Exchange Commission, and the U.S. Commodities Futures Trading Commission, she said. The Division cooperated with states and foreign governments in pursuing civil and criminal investigations and in competition policy matters.

"I am grateful for my two and a half years of service as Assitant Attorney General of the Antitrust Division," said Varney. "From the start of my time here, it has been a tremendous privilege to work with the department's leadership and the dedicated professionals in the Antitrust Division."

A news release announcing the Assistant Attorney General’s departure from the Justice Department appears here on the Antitrust Division’s website.

Antitrust Chief Details Accomplishments of Last Two Years

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

Christine Varney, Assistant Attorney General in charge of the Department of Justice Antitrust Division, told attendees of a U.S. Chamber of Commerce event on June 24 in Washington, D.C. that after more than two years on the job, "the time is ripe to examine whether the Antitrust Division has been steadfast in ensuring vigorous enforcement of the antitrust law, as I promised upon confirmation." Varney talked about civil merger and non-merger enforcement, among other topics.

Merger Enforcement

With respect to merger enforcement, Varney said the Antitrust Division was committed to going to court “where the parties have been unwilling to resolve the anticompetitive aspects of their transactions.”

Two current merger challenges were cited: H&R Block Inc.’s proposed acquisition of the maker of TaxACT do-it-yourself tax preparation software, and the combination of point-of-sale (POS) terminal sellers VeriFone Systems Incorporated and Hypercom Corporation. She also noted the recent settlement in a third matter involving the acquisition of a Tyson Foods Harrisonburg chicken processing complex by George’s, Inc.

Varney also discussed mergers and acquisitions that involved vertical theories. Among the transactions that have arisen in the past few years were: ticket seller Ticketmaster Entertainment, Inc.’s acquisition of concert promoter Live Nation, Inc.; a joint venture between Comcast Corp. and General Electric Co.’s subsidiary NBC Universal Inc.; and Google’s acquisition of ITA Software Inc.—a company that develops and licenses a search software product used by the travel industry to perform flight searches and offer airfare comparison and booking websites.

The transactions demonstrate that “business is frequently looking for strategic acquisitions that offer the synergies and efficiencies presented by combining various levels of production.”

As with the purely horizontal transactions, the Antitrust Division reviewed these transactions "in light of their specific facts and market conditions and evaluated the competitive harms," said Varney. "In each case, we concluded that the transactions, as proposed, would give rise to competitive harm, and while we were prepared to sue, the parties agreed to consent decrees that addressed our concerns."

Civil Non-Merger Enforcement

Varney also mentioned that the Antitrust Division remained active in civil non-merger enforcement. She pointed to two matters in ongoing litigation—the Antitrust Division’s lawsuit challenging Blue Cross Blue Shield of Michigan’s Most Favored Nation Clauses with hospitals, and the Antitrust Division’s challenge to merchant fees in its lawsuit against American Express.

Another example of civil enforcement was the recent settlement in the Justice Department’s first case since 1999 challenging a monopolist with engaging in traditional anticompetitive unilateral conduct against United Regional Health Care System of Wichita Falls—a dominant health care provider.

Competition Advocacy

The antitrust chief discussed competition advocacy and regulatory outreach across the government. The Division works with a broad range of federal and state agencies to promote competition principles in important industries, including agriculture, telecommunications, energy, financial services, and healthcare.

“Among my competition advocacy priorities when I arrived at the Division was to explore the appropriate role for antitrust and regulatory enforcement in American agriculture, and this required collaboration at many levels,” said Varney, citing a series of workshops hosted by the Antitrust Division and the U.S. Department of Agriculture.

The Division has worked collaboratively with the Department of Transportation, the Federal Energy Regulatory Commission, the Securities and Exchange Commission, and the U.S. Commodities Futures Trading Commission, said Varney.

An example of cooperation with other federal and state agencies has been the ongoing municipal bonds investigation. The Division played a “key role” in obtaining an agreement from Bank of America to pay $137.3 million in restitution and disgorgement to state and federal agencies for its participation in a conspiracy to rig bids in the municipal bond derivatives market and as a condition of its admission into the Department of Justice’s Antitrust Corporate Leniency Program.

Bank of America entered into agreements with the SEC, the Internal Revenue Service, Office of the Comptroller of the Currency, and 20 state attorneys general.

Text of the remarks (“Vigorously Enforcing the Antitrust Laws: Developments at the Division”) appear here on the Department of Justice Antitrust Division website.

Antitrust Division Updates 2004 Merger Remedy Guidance

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

To reflect changes in the merger landscape and lessons learned over the last seven years, the Department of Justice Antitrust Division has updated its 2004 guidance on merger remedies.

The Policy Guide to Merger Remedies is used by Antitrust Division staff in analyzing proposed remedies in its merger matters. It also provides transparency into the Antitrust Division’s approach to merger remedies for the business community, the antitrust bar, and the broader public, according to the Justice Department’s June 17 announcement of the update. The text of the updated policy guide appears at CCH Trade Regulation Reporter ¶13,172.

The key principles the Antitrust Division applies in analyzing merger remedies remain the same:

(1) Effectively preserving competition;

(2) Focusing on preserving competition, not protecting individual competitors; and

(3) Carefully applying legal and economic principles to the particular facts of a specific case.

Structural, Conduct Provisions

The policy guide states that effective merger remedies typically include structural provisions, conduct provisions, or a combination. In horizontal merger matters, the Antitrust Division continues to rely predominantly on structural remedies, sometimes in combination with conduct remedies, which usually prescribe certain aspects of the merged firm’s post-consummation business conduct. However, the Antitrust Division has found that, in many vertical transactions, tailored conduct relief can prevent competitive harm while allowing the merger’s efficiencies to be realized.

The most common forms of conduct relief are firewall, nondiscrimination, mandatory licensing, transparency, and anti-retaliation provisions, as well as prohibitions on certain contracting practices, according to the policy guide.

Misinterpretation of 2004 Guidance

The policy guide notes that some had misinterpreted the Antitrust Division’s 2004 guidance on remedies to mean that if a structural remedy is not available in a particular merger matter, or would be ineffective, the Antitrust Division must let the transaction proceed. That interpretation does not accurately reflect the policy or practice of the Antitrust Division, it was noted.

“In every case, the Antitrust Division focuses on the specific facts of the proposed transaction,” said Christine Varney, Assistant Attorney General in charge of the Antitrust Division. “We are prepared to clear a merger, block a merger or accept a remedy that maintains efficiencies as long as the result eliminates any competitive harm. In the current environment of increasing transnational mergers and complex vertical transactions, the Antitrust Division must be ever nimble in its efforts to ensure that any remedies effectively preserve competition, promote innovation and protect consumers. The updated policy guide takes into account these changes.”

Fix-It-First Remedies

In most merger cases, the Antitrust Division will require identification of a package of assets to be divested pursuant to a consent decree. However, the policy guide explains that the Antitrust Division will consider a fix-it-first remedy—a structural solution implemented by the parties that the Antitrust Division accepts before a merger is consummated—so long as the remedy need not be monitored.

A fix-it-first remedy may preserve competition in the market more quickly and effectively than a decree and provide the parties with the maximum flexibility in fashioning the appropriate divestiture, it was noted.

A news release on the issuance of the updated policy guide appears here on the Department of Justice Antitrust Division website. Text of the updated policy guide appears here.

Recent Merger Cases Demonstrate International Cooperation: Antitrust Division Official

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

At the second annual Chicago Forum on International Antitrust Issues on June 9, Rachel Brandenburger, special advisor for international matters at the Department of Justice Antitrust Division, cited four recent merger cases as examples of successful international cooperation among enforcement agencies.

The 2010 review of the Cisco/Tandberg merger was described as a model of cooperation between the United States and the European Commission (EC). In that matter, the Department of Justice Antitrust Division decided not to challenge Cisco Systems Inc.'s acquisition of videoconferencing competitor Tandberg ASA (Trade Regulation Reporter ¶50.251) based at least in part on the commitments that Cisco had made to the EC.

Brandenburger also cited the Antitrust Division’s efforts with the Canada Competition Bureau to put together an antitrust remedy for ticket seller Ticketmaster Entertainment, Inc.’s acquisition of concert promoter Live Nation, Inc. A 2010 consent decree (2010-2 Trade Cases ¶77,113) resolved U.S. antitrust concerns by ordering divestitures and behavioral restrictions. The same day the Justice Department announced its proposed relief, the Canada Competition Bureau announced that a consent agreement was filed with the Competition Tribunal to resolve that country's concerns over the combination.

The recent clearance of the acquisition of software patents and patent applications from the software company Novell Inc. by a joint venture consisting of Microsoft Inc., Oracle Inc., Apple Inc., and EMC Corp. was also discussed. In April, both the Antitrust Division and Germany’s Bundeskartellamt announced that the joint venture, CPTN, could proceed with the first phase of the acquisition after addressing competition concerns through divestitures. Brandenburger noted that the review marked the first time in 20 years that the Antitrust Division worked with Germany’s Bundeskartellamt on a merger. The close cooperation between the Antitrust Division and the Bundeskartellamt was aided by waivers from the parties that enabled the agencies to exchange otherwise confidential information.

Brandenburger also pointed to a transaction resolved just last month. In May, the Antitrust Division announced that Unilever N.V. agreed to divestitures intended to preserve competition in certain hair care product markets to resolve U.S. antitrust concerns over its proposed $3.7 billion acquisition of Alberto-Culver Company (Trade Regulation Reporter ¶50,992). In announcing the settlement, the Justice Department said that it cooperated with the United Kingdom Office of Fair Trading, the Mexico Federal Competition Commission, and South Africa's Competition Commission in conducting the investigation.

Outside the merger area, the ongoing investigation of cartel activity in the air transportation industry is an example of anti-cartel cooperation with competition authorities on five continents, according to Brandenburger.

Chicago Forum on International Issues

The Chicago Forum on International Antitrust Issues was held June 9-10 at Northwestern University School of Law. Billed as “a premier Midwest conference examining the latest developments in competition regulation around the globe,” the program featured presentations on antitrust enforcement in the U.S., Canada, Mexico, Europe, and the BRIC countries (Brazil, Russia, India, and China), among other jurisdictions.

Government speakers included FTC Commissioner William E. Kovacic and representatives from the Canada Competition Bureau and the Mexico Federal Competition Commission.

Further information regarding the annual conference is available here.

New Charges Brought in Antitrust Division's Municipal Bond Investigation

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

A federal grand jury in New York City indicted three former executives of a financial services company for their participation in fraud schemes and conspiracies related to bidding for contracts for the investment of municipal bond proceeds and other municipal finance contracts, the Department of Justice announced on December 9.

One executive also was indicted for witness tampering in connection with the Justice Department’s ongoing investigation into anticompetitive and fraudulent conduct in the municipal bond industry.

Fraud Schemes and Conspiracies

“The individuals charged today allegedly participated in complex fraud schemes and conspiracies that subverted competition in the market for municipal finance contracts and deprived municipal bond issuers of the benefits of their investments to the detriment of the public,” said Christine Varney, Assistant Attorney Generl in charge of the Department of Justice Antitrust Division.

“This type of anticompetitive activity in our financial markets will not be tolerated and the Antitrust Division will continue to prosecute those who engage in this illegal conduct,” Varney remarked. “This includes individuals who purposely seek to obstruct the government’s investigation.”

Investment Agreements

The charged conspiracies and schemes all related to a type of contract—known as an investment agreement—and other municipal finance contracts provided to public entities, such as state, county, and local governments and agencies throughout the United States.

Major financial institutions—including banks, investment banks, insurance companies, and financial services companies—are among the providers of investment agreements and other related municipal finance contracts.

Public entitles typically hire a broker to conduct a competitive bidding process among various providers prior to awarding these agreements and contracts, according to the Justice Department.

One of the defendants, a Belgian national currently residing in Moscow, was arrested at John F. Kennedy International Airport in New York City on December 1 on a criminal complaint that was filed under seal on September 16.

The criminal complaint charged that the individual participated in a scheme to defraud a municipal bond issuer with respect to the investment of municipal bond proceeds.

Superseding Indictment

The indictment alleges that these three individuals conspired with Beverly Hills-based Rubin/Chambers, Dunhill Insurance Services Inc. (CDR), and others in order to obtain from CDR information about the prices and other information related to competiting bids. They then used the information to determine their employer's bid, according to the indictment.

Charges against CDR and some of its current and former executives were the first to be filed in the Justice Department's ongoing investigation. A superseding indictment was filed on December 7 in the case against CDR to include violations of the honest services statute in three counts alleging wire fraud.

A news release on the charges appears here on the Department of Justice Antitrust Division’s website. Further details will appear in CCH Trade Regulation Reporter.

Indictment Charges Former Airline Executives with Conspiracy to Fix Fuel Surcharges

This posting was written by John W. Arden.

Four former airline executives have been charged with a conspiracy to fix surcharges on air cargo shipments from the U.S. to South and Central American, following Hurricanes Katrina and Rita, in a one-count indictment returned yesterday in the federal district court in Miami.

Guillermo “Willy” Cabeza, George Gonzales, Rodrigo Hernan Hildalgo, and Luis Juan Soto allegedly conspired to suppress and eliminate competition by agreeing to impose an increase to fuel surcharges on air cargo from September 2005 to at least November 2005.

According to the indictment, the four executives engaged in discussions—including during a meeting near Miami’s Kendall-Tamiami Executive Airport—agreeing to impose an increase in fuel surcharges; participated in communications to implement and monitor the agreement; and accepted payments at collusive and noncompetitive rates.

The former executives are charged with price fixing in violation of the Sherman Act, which carries a maximum penalty for each individual of 10 years in prison and a $1 million fine. A fine may be increased to twice the gain derived from the crime or twice the loss suffered by victims of the crime.

Cabeza and Soto are former presidents of Miami-based air cargo carriers. Gonzales is the former chief commercial officer of a Peruvian air cargo carrier. Hildalgo is the former vice president of sales and marketing of a Miami-based air cargo carrier.

The indictment is the result of the Justice Department’s ongoing investigation into price fixing in the air transportation industry. Thus far, 18 airlines and 14 executives have been charged. More than $1.6 billion in criminal fines have been imposed, and four executives have been sentenced to serve prison time. Charges are pending against 10 individuals.

Further information is available here on the Department of Justice Antitrust Division’s website.

Tech Firms Resolve U.S. Antitrust Challenge to Hiring Practices

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

As the Department of Justice Antitrust Division continues its investigation into the use of “no solicitation” agreements among employers to hold down employee salaries and defections, six high technology companies have agreed to modify their recruiting practices to settle a federal antitrust action.

The Antitrust Division alleged that the companies entered into agreements that restrained competition between them for highly skilled employees. Under the terms of a proposed consent decree, the companies would be prohibited from entering into an agreement not to cold call or recruit an employee.

The civil complaint and proposed consent decree were filed on September 24 in the federal district court in Washington, D.C. The consent decree, if approved by the court, would resolve the government's suit.

Ban on Recruitment "Cold Calling"

The Department of Justice alleged that the six companies—Adobe Systems Inc., Apple Inc., Google Inc., Intel Corp., Intuit Inc. and Pixar—entered into five substantially similar agreements that banned "cold calling" of employees for recruitment purposes.

Senior executives of the companies purportedly entered the express agreements and enforced them. According to the government, the agreements—some of which date back to 2005—were naked restraints of trade that were per se unlawful under Sec. 1 of the Sherman Act.

The government contended that the agreements to ban “cold calling” were not justified by the legitimate collaborative projects in which the companies engaged. They were broader than reasonably necessary for any collaboration between the companies. The agreements were not tied to any specific collaboration, nor were they narrowly tailored.

Investigation of Employment Practices

In announcing the matter on September 24, the Justice Department said that the complaint arose out of a larger investigation by the Antitrust Division into employment practices by high tech firms. The statement went on to say that the Antitrust Division continues to investigate other similar no solicitation agreements.

This is not the first Justice Department action to challenge alleged efforts to hold down employee wages. In its Competitive Impact Statement explaining the settlement, the government cited a 1996 consent decree resolving an alleged agreement to curb competition between residency programs for senior medical students and residents of other programs (U.S. v. Assn. of Family Practice Residency Directors, W.D. Missouri, 1996-2 Trade Cases ¶71,533). The consent decree enjoined prohibitions on the solicitation of residents from other programs.

While the companies did not admit to any wrongdoing, the investigation opened the door for private antitrust claims from employees. Recent efforts to pursue antitrust class actions challenging employer efforts to damp wages have, however, not proven successful.

In Reed v. Advocate Health Care(N.D. Illinois, 2009-2 Trade Cases ¶76,758), the federal district court in Chicago rejected a class action against a purported conspiracy to suppress wages of registered nurses. Similarly, a federal district court in New Jersey refused to certify a putative class alleging a conspiracy among major U.S. oil companies to exchange information concerning employee competition.

Summary judgment was ultimately entered in favor of the defending oil companies in the long-running matter (In re: Compensation of Managerial, Professional and Technical Employees Antitrust Litigation, D. New Jersey, 2006-1 Trade Cases ¶75,096; 2008-2 Trade Cases ¶76,438).

A new release on the proposed settlement appears here on the Antitrust Division’s website. Text of the complaint and proposed consent decree appear here.

The proposed consent decree in U.S. v. Adobe Systems, Inc. will appear at CCH Trade Regulation Reporter ¶50,982.

UAL/Continental Asset Transfer Assuages Antitrust Division’s Merger Concerns

This posting was written by Georgia Koutouzos, Editor of CCH Aviation Law Reporter.

In light of the recent agreement by United Airlines and Continental Airlines to transfer takeoff and landing slots and other assets at Newark Liberty Airport to Southwest Airlines, the U.S. Department of Justice announced on August 27 that it has closed its investigation into the proposed merger of UAL Corporation, United’s parent company, and Continental.

The two carriers entered into the arrangement with Southwest in response to the DOJ's principal concerns regarding the competitive effects of the proposed United/Continental merger.

The Justice Department’s investigation determined that the proposed merger would combine the airlines’ largely complementary networks, resulting in overlap on a limited number of routes where United and Continental offer competing nonstop service.

The largest of those routes are between United’s hub airports and Continental’s hub at Newark Airport, where Continental has a high share of service and where there is limited availability of slots, making entry by other airlines particularly difficult.

The transfer of slots and other assets at Newark to Southwest—a low cost carrier that currently has only limited service in the New York metropolitan area and no Newark service—resolves DOJ's principal competition concerns and is likely to significantly benefit consumers on overlap routes as well as on many other routes, the agency said. The slot transfer is through a lease that permanently conveys to Southwest all of Continental’s rights in the assets, in compliance with FAA rules.

Text of the Department of Justice news release appears here.

In announcing the settlement in an August 27 statement, United and Continental said that the slot pair transfer was expected to have minimal impact on combined carrier's route network.

Jeff Smisek, Continental's Chairman, president and CEO, described the leasing arrangement as “a fair solution that would allow Continental and United to create an airline that will provide customers with an unparalleled global network and top quality products and services, while enhancing domestic competition at Newark.”

In a further statement, UAL Corporation chairman, president and CEO Glenn Tilton said that he looked forward to the airlines’ stockholders’ votes on September 17 and expected to close the merger by October 1, 2010.

Continental and United announced an all-stock merger of equals on May 3, 2010. In July, the airlines’ proposed merger received clearance from the European Commission, which found that the transaction would not raise competitive concerns in Europe or on trans-Atlantic routes.

Federal Antitrust Agencies Issue Revised Guidance for Merging Competitors

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The Federal Trade Commission and the Department of Justice announced today the issuance of revised Horizontal Merger Guidelines. The guidelines are intended to outline for merging parties, courts, and antitrust practitioners how the federal antitrust agencies evaluate the likely competitive impact of mergers and whether those mergers comply with U.S. antitrust law.

The guidelines have not been thoroughly overhauled since 1992. The 1992 guidelines were updated in 1997 to include a discussion of merger-specific efficiencies that might justify approval of a transaction (CCH Trade Regulation Reporter ¶13,104).

At the outset, the revised guidelines explain that the agencies seek to identify and challenge competitively harmful mergers while avoiding unnecessary interference with mergers that are either competitively beneficial or neutral.

The focus is on the competitive effects of a transaction. The revised guidelines detail the categories and sources of evidence that the antitrust agencies consider informative in predicting the likely adverse competitive effects of a merger.

Role of Market Definition, Market Concentration

The analysis need not start with market definition, according to the revised guidelines. “Evidence of competitive effects can inform market definition, just as market definition can be informative regarding competitive effects,” the guidelines explain.

The draft guidelines, which were released on April 20, had been criticized by some commentators for failing to recognize the significance of market definition in merger analysis.

Among the comments from the American Bar Association Section of Antitrust Law in response to the draft guidelines was a suggestion that the guidelines make clear that market definition remained a necessary element of merger analysis under Sec. 7 of the Clayton Act in order to be consistent with judicial precedent.

On the other hand, the American Antitrust Institute concluded that the guidelines draft “rightly downplays the centrality of market definition to the enforcement process.”

Recognizing the continuing need for market definition in merger analysis, the revised guidelines update the thresholds that determine whether a transaction warrants further scrutiny by the agencies. The Herfindahl-Hirschman Index (HHI) measures for market concentration have been raised in order to be more consistent with current agency practice.

Approach of Enforcers

The heads of both the FTC and the Department of Justice Antitrust Division said the revised guidelines more accurately reflect the methods their staffs use to review mergers than the earlier guidelines.

“The revised guidelines better reflect the agencies’ actual practices,” said Christine Varney, Assistant Attorney General in charge of the Department of Justice Antitrust Division. “The guidelines provide more clarity and transparency, and will provide businesses with an even greater understanding of how we review transactions.” Text of Varney's statement appears here on the Department of Jusitice website.

In a statement released this afternoon, FTC Chairman Jon Leibowitz called the revised guidelines “a clear and systematic description of the techniques the FTC and the Antitrust Division of the Department of Justice use to review mergers, and a document that has received bi-partisan and unanimous support from the Commission.”

Commissioner J. Thomas Rosch, however, issued a statement saying that the guidelines “are still flawed both as a description of how the staff (at the Commission at least) conducts ex ante merger review and what the Agencies should tell courts about merger analysis.”

“These Guidelines do not describe the way that the Bureau of Competition and enforcement staff at the Commission proceed today,” Rosch continued. “They also do not reflect the way that the courts proceed.”

Rosch questioned an “overemphasis on economic formulae and models.” He expressed concern that the revised guidelines create “the misimpression that non-price factors are far less significant than price factors to the Commission” and “fail to offer a clear framework for analyzing non-price considerations.”

Significant Advancements

Despite the criticisms, Rosch concurred with the issuance of the guidelines in light of significant advancements made by the revised guidelines. Rosch said that the revised guidelines corrected a misimpression of the 1992 guidelines that proof of market structure and shares were “gating items” without which competitive effects cannot be considered.

“The revised guidelines properly consider competitive effects first, and market definition second, thereby making clear that while market definition is important to assessing competitive effects and that the market must be defined at some point in the process, ultimately merger analysis must rest on the competitive effects of a transaction,” the commissioner said.

Rosch also pointed to the revised guidelines’ list of empirical evidence that might illuminate a transaction’s competitive effects as a substantial contribution.

2006 Commentary

The revised guidelines note that the “Commentary on the Horizontal Merger Guidelines,” which the agencies jointly issued in 2006 (CCH Trade Regulation Reporter ¶50,208), remains a valuable supplement to the guidelines. Some of the revisions reflect refinements and changes previously identified in the commentary.

The revised Horizontal Merger Guidelines are available here on the FTC website. They will appear at CCH Trade Regulation Reporter ¶13,100.